Taxes vs. subsidies in the fight to preserve the Brazilian Amazon

Most land is cleared for cattle, but there are ways of changing the dynamics.

Brazil had the largest net forest loss of any country between 1990 and 2010. Perhaps for this reason, in 2008 Brazil pledged to reduce the rate of deforestation in Brazil's Legal Amazon to 80 percent of historical rates by 2020 as part of its National Climate Action Plan. Since an enormous stock of carbon remains trapped in Brazil's Amazonian forests, saving these lands could dramatically reduce global greenhouse gas emissions.

New economic models suggest that deforestation could be greatly reduced by 2030 simply by changing the economics of raising cattle. You can get a reduction forest clearance by taxing land on which cattle is pastured conventionally or by subsidizing land on which cattle is pastured semi-intensively. Both work, but the tax saves slightly more forest, and thus offers more greenhouse gas abatement.

And cattle ranching is the leading cause of deforestation in the Brazilian Amazon. Seventy percent of formerly forested land, and 91 percent of land deforested since 1970, is used for livestock pasture. It is possible, however, to graze cattle in what’s called a semi-intensive system, in which livestock feeding is based on a combination of pasture grazing and harvested forages. When utilized properly, this system can double the productivity of pasturelands compared to conventional land management practices.

The new paper models the impacts of two policies: a tax on land-intensive grazing, and a subsidy for semi-intensive grazing. The models revealed how each affected greenhouse gas emissions, land use, agriculture, and commodity markets. The authors also incorporated different trade scenarios to examine how international movement of cattle products and beef consumption would be affected by the tax or the subsidy.

The tax ended up raising the price of beef, which discouraged all livestock raising, including the adoption of the semi-intensive system. But the tax did save forest because the higher beef prices discouraged both exports and domestic consumption.

Under the subsidy, the decreased cost of beef production in Brazil led to increased exports and beef consumption. Even though less forest was cleared for each unit of beef produced, this ultimately caused continued deforestation and greenhouse gas emission. Even so, the pace went down, so either policy would achieve more than half of Brazil's deforestation policy targets.

Land use is a major source of greenhouse gas emissions in Brazil and other emerging economies. This model suggests that a tax, a subsidy, or a combination of the two methods can encourage intensive pasturing and land sparing. They might be an effective way for these countries to balance agricultural development with forest protection.